IR35 delay gives business more time to prepare

The UK government has deferred the implementation of new tax rules for off-payroll workers by 12 months in recognition of the burden already faced by business as a result of the disruption caused by the coronavirus outbreak.
 
  Changes to the IR35 off-payroll working rules in the UK private sector have been delayed by 12 months in response to growing uncertainty surrounding the coronavirus (COVID-19) pandemic.

The legislation, which will make organisations responsible for determining whether a contractor carrying out work for them should be treated as an employee for tax purposes, was due to be introduced on 6 April this year.

Chief secretary to the Treasury, Steve Barclay, announced the deferral late on 17 March.

He stressed however that:

"This is a deferral and not a cancellation, and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same amount of tax as those employed directly.”

The legislation is now expected to take effect on 6 April 2021, giving businesses more time to prepare and providing the government with an opportunity to improve its communication and support on the issue.

Many businesses that stand to be affected by IR35 will be struggling to deal with the effects of the coronavirus disruption and many of the workers that have been, or are likely to be, laid off, will be contractors.

Given the change of circumstances, many companies will understandably be tempted to relegate IR35 preparations from their list of priorities.

However, the government is unlikely to extend the implementation date again and there is a chance that its promise of a "light touch" approach to enforcement for the first year of new rules will be rescinded in view of this delay.

Companies are therefore urged to make the necessary preparations as soon as they are able.

For more information on how to comply with IR35, please visit our dedicated web page.